US
Markets slashed the war risk premium in crude oil prices, sparking a USD pullback against most major currencies, and a rally in global stocks and bonds. Brent crude oil plunged from an intra-day high of $120 a barrel yesterday to $90 a barrel after President Donald Trump stressed that the war with Iran would end “very soon”, adding he is thinking about taking over the Strait of Hormuz. The comments reduced the probability of a prolonged disruption in energy production and shipping.
Nevertheless, energy markets remain extremely headline-driven, with the safety of shipping through the Strait of Hormuz the primary barometer for global energy risk. Ship traffic through the Strait has largely stopped but the data may not be reliable because vessels most likely switched off their tracking system, while GPS jamming can distort vessel positions.
Strait of Hormuz Factsheet (here for more details):
• Crude oil: 15 mb/d, nearly 34% global crude oil trade, transits the Strait – 80% destined for Asia and 4% to Europe. Alternative export routes to bypass the Strait are limited with only 3.5 to 5.5 mb/d of pipeline capacity.
• Natural gas: about 93% of Qatar’s and 96% of the UAE’s LNG exports transit through the Strait, representing 19% of global LNG trade. Almost 90% of the total volumes exported via the Strait was destined to the Asian market, while the share of Europe was just over 10%. There are no alternative routes to bring these volumes to market.
Setting geopolitics aside, USD is poised to re-test the lower end of its range seen since June 2025, reflecting narrower rate differentials between the US and other major economies.
NORWAY
NOK is underperforming on lower crude oil prices. Norway inflation slowed in February but remains high relative to the Norges Bank’s forecast. Headline CPI fell to 2.7% y/y (consensus: 2.8%, Norges Bank: 1.9%) vs. 3.6% in January and underlying CPI dropped to a four-month low at 3.0% y/y (consensus: 3.0%, Norges Bank: 2.6%) vs. 3.4% in January.
In January, the Norges Bank penciled in one full 25bps rate cut to 3.75% by Q4, while the swaps curve price-in small odds of a rate hike in the next twelve months. The risk is the market reprice rate cut bets because of rising spare capacity in Norway’s economy. The Norges Bank projects the country’s output gap to average -0.2% of potential GDP over 2026 vs. 0% in 2025.
AUSTRALIA
AUD/USD rallied above 0.7100, with momentum building toward the mid-February high around 0.7150. Australia’s latest business and consumer sentiment indexes won’t change the dial on RBA rate hike expectations, though the employment readings flash some red flags. The NAB business employment conditions index fell 2pts to +3 in February, consistent with a rising unemployment rate. Meanwhile, the Westpac–MI consumer sentiment unemployment expectations index rose 3.8% to 134.7 in March, above the long run average of 129.2, suggesting consumers were less confident about the labor market outlook.
The RBA next policy rate decision is on March 17, and cash rate futures imply 55% odds of a 25bps increase to 4.10%. We think the RBA can deliver a back-to-back rate hike next week because all the RBA’s internal models show a positive output gap consistent with tighter capacity constraints.
CHINA
USD/CNH extended its drop under 6.9000. China’s January-February trade data was surprisingly strong. Both exports and imports surged in the first two months of the year by 21.8% y/y (consensus: 7.2%) and 19.8% y/y (consensus: 7.0%), respectively. Interestingly, China’s crude oil imports increased 16% y/y (the most in eight years) perhaps in anticipation of the Iran war.
